Bulletin No. 2021–46

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2021–46

November 15, 2021

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

Notice 2021-35, page 723.

The notice publishes the inflation adjustment factor for the

carbon oxide sequestration credit under § 45Q for calendar

Finding Lists begin on page ii.

year 2021. Also, the notice includes a statement that the

IRS is not certifying that 75 million metric tons of qualified

carbon oxide has been taken into account by taxpayers filing

on annual report pursuant to section 6 of Notice 2009-83,

2009-2 C.B. 588.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

November 15, 2021 

Bulletin No. 2021–46

Part III

Credit for Carbon Oxide

Sequestration

2021 Section 45Q Inflation

Adjustment Factor

Notice 2021-35

SECTION 1. PURPOSE

This notice publishes the inflation

adjustment factor for the credit for carbon oxide sequestration under § 45Q of

the Internal Revenue Code (§ 45Q credit)

for calendar year 2021. The inflation

adjustment factor is used to determine

the amount of the credit allowable under

§ 45Q. This notice also provides that the

IRS, in consultation with the EPA, does

not certify that the aggregate amount of

qualified carbon oxide taken into account

for purposes of § 45Q has reached

75,000,000 metric tons.

SECTION 2. BACKGROUND

Section 45Q was enacted by § 115 of

the Energy Improvement and Extension

Act of 2008, Division B of Pub. L. No.

110-343, 122 Stat. 3765, 3829 (October 3,

2008), to provide a credit for the sequestration of carbon dioxide. Section 45Q

was amended by § 1131 of the American

Recovery and Reinvestment Tax Act of

2009, Division B of Pub. L. 111-5, 123

Stat 115 (February 17, 2009) and more

recently by section 41119 of the Bipartisan Budget Act of 2018 (BBA), Pub.

L. No. 115-123 (February 9, 2018) and

the Taxpayer Certainty and Disaster Tax

Relief Act of 2020, enacted as Division

EE of the Consolidated Appropriations

Act, 2021, Pub. L. 116-260, 134 Stat.

1182, 3051 (December 27, 2020). As a

result of the modifications made by the

BBA amendment, the credit under § 45Q

now applies to the sequestration of “qualified carbon oxide,” a broader term than

qualified carbon dioxide. The amount

of the credit is also increased for carbon

oxide captured with equipment originally

placed in service on or after the date of

enactment of BBA.

Bulletin No. 2021–46

Section 45Q(a)(1) allows a credit of

$20 per metric ton of qualified carbon

oxide (i) captured by the taxpayer using

carbon capture equipment which is originally placed in service at a qualified

facility before the date of the enactment

of BBA, (ii) disposed of by the taxpayer

in secure geological storage, and (iii) not

used by the taxpayer as a tertiary injectant

in a qualified enhanced oil or natural gas

recovery project.

Section 45Q(a)(2) allows a credit of

$10 per metric ton of qualified carbon

oxide (i) captured by the taxpayer using

carbon capture equipment which is originally placed in service at a qualified

facility before the date of the enactment

of BBA, and (ii) either (I) used by the

taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery

project and disposed of by the taxpayer in

secure geological storage or (II) utilized

by the taxpayer in a manner described in

§ 45Q(f)(5).

Section 45Q(a)(3) allows a credit of

the applicable dollar amount (as determined under § 45Q(b)(1)) per metric ton

of qualified carbon oxide (i) captured by

the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the

date of the enactment of BBA during the

12-year period beginning on the date the

equipment was originally placed in service, (ii) disposed of by the taxpayer in

secure geological storage, and (iii) neither used as a tertiary injectant in a qualified enhanced oil or natural gas recovery

project nor utilized in a manner described

in § 45Q(f)(5).

Section 45Q(a)(4) allows credit of the

applicable dollar amount (as determined

under § 45Q(b)(1)) per metric ton of

qualified carbon oxide (i) captured by the

taxpayer using carbon capture equipment

which is originally placed in service at a

qualified facility on or after the date of

the enactment of BBA, during the 12-year

period beginning on the date the equipment was originally placed in service,

and (ii) either (I) used by the taxpayer as

a tertiary injectant in a qualified enhanced

oil or natural gas recovery project and

disposed of by the taxpayer in secure geo-

723

logical storage or (II) utilized in a manner

described in § 45Q(f)(5).

For purposes of determining the carbon

oxide sequestration credit under § 45Q, a

taxpayer may elect under § 45Q(b)(3) to

have the dollar amounts applicable under

§ 45Q(a)(1) or (2) apply in lieu of the

dollar amounts applicable under § 45Q(a)

(3) or (4) for each metric ton of qualified

carbon oxide which is captured by the

taxpayer using carbon capture equipment

which is originally placed in service at a

qualified facility on or after the date of the

enactment of BBA.

Section 45Q(c) defines the term “qualified carbon oxide” as (i) any carbon dioxide which (I) is captured from an industrial

source by carbon capture equipment which

is originally placed in service before the

date of the enactment of BBA, (II) would

otherwise be released into the atmosphere

as industrial emission of greenhouse gas

or lead to such release, and (III) is measured at the source of capture and verified

at the point of disposal, injection, or utilization; (ii) any carbon dioxide or other

carbon oxide which (I) is captured from an

industrial source by carbon capture equipment which is originally placed in service

on or after the date of the enactment of

BBA, (II) would otherwise be released

into the atmosphere as industrial emission

of greenhouse gas or lead to such release,

and (III) is measured at the source of capture and verified at the point of disposal,

injection, or utilization; or (iii) in the case

of a direct air capture facility, any carbon

dioxide which (I) is captured directly from

the ambient air, and (II) is measured at the

source of capture and verified at the point

of disposal, injection, or utilization.

Section 45Q(d) defines the term

“qualified facility” as any industrial

facility or direct air capture facility (i)

the construction of which begins before

January 1, 2026, and (I) construction of

carbon capture equipment begins before

such date, or (II) the original planning

and design for such facility includes

installation of carbon capture equipment;

and (ii) which captures (I) in the case

of a facility which emits not more than

500,000 metric tons of carbon oxide into

the atmosphere during the taxable year,

November 15, 2021

not less than 25,000 metric tons of qualified carbon oxide during the taxable year

which is utilized in a manner described

in § 45Q(f)(5), (II) in the case of an electricity generating facility which is not

described in § 45Q(d)(2)(A), not less

than 500,000 metric tons of qualified carbon oxide during the taxable year, or (III)

in the case of a direct air capture facility

or any facility not described in § 45Q(d)

(2)(A) or (B), not less than 100,000 metric tons of qualified carbon oxide during

the taxable year.

Under § 45Q(f)(7), for taxable years

beginning in a calendar year after 2009,

the dollar amounts contained in § 45Q(a)

(1) and (2) must be adjusted for inflation

by multiplying such dollar amount by the

inflation adjustment factor for such calendar year determined under § 43(b)(3)(B),

determined by substituting “2008” for

“1990.”

Section 43(b)(3)(B) defines the term

“inflation adjustment factor” as, with

respect to any calendar year, a fraction the

numerator of which is the GNP implicit

price deflator for the preceding calendar

year and the denominator of which is the

GNP implicit price deflator for 1990. For

purposes of § 45Q(f)(7), for the 2021 calendar year, the inflation adjustment factor

is a fraction the numerator of which is

November 15, 2021

the GNP implicit price deflator for 2020

(113.586) and the denominator of which

is the GNP implicit price deflator for 2008

(94.268).

Section 45Q(g) provides that in the

case of any carbon capture equipment

placed in service before the date of the

enactment of BBA, the credit under

§ 45Q shall apply with respect to qualified carbon oxide captured using such

equipment before the end of the calendar

year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies

that, during the period beginning after

October 3, 2008, a total of 75,000,000

metric tons of qualified carbon oxide

have been taken into account in accordance with (i) § 45Q(a), as in effect on

the day before the date of the enactment

of BBA, and (ii) § 45Q(a)(1) and (2).

SECTION 3. INFLATION

ADJUSTMENT FACTOR

The inflation adjustment factor for

calendar year 2021 is 1.2049. The § 45Q

credit for calendar year 2021 is $24.10

per metric ton of qualified carbon oxide

under § 45Q(a)(1) and $12.05 per metric ton of qualified carbon oxide under

§ 45Q(a)(2).

724

SECTION 4. TAX CREDIT

UTILIZATION

Section 6 of Notice 2009-83 requires

taxpayers to file annual reports that provide

(among other information) the amount (in

metric tons) of qualified carbon oxide for

the taxable year that has been taken into

account for purposes of claiming the § 45Q

credit. The annual reports must be filed with

the Internal Revenue Service (Service) not

later than the last day of the second calendar

month following the month during which

the tax return on which the § 45Q credit is

claimed was due (including extensions).

Based on all of the information available to the IRS and the EPA as of October

26, 2021, the IRS, in consultation with the

EPA, does not certify that the aggregate

amount of qualified carbon oxide taken

into account for purposes of § 45Q has

reached 75,000,000 metric tons.

SECTION 5. DRAFTING

INFORMATION

The principal author of this notice

is Maggie Stehn of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information

regarding this notice contact Maggie Stehn

at (202) 317-6853 (not a toll-free number).

Bulletin No. 2021–46

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

­effect:

Amplified describes a situation where

no change is being made in a prior published position, but the prior position is

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds that

the same principle also applies to B, the

earlier ruling is amplified. (Compare with

modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

has caused, or may cause, some confusion. It is not used where a position in a

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously published ruling and points out an essential

difference between them.

Modified is used where the substance

of a previously published position is being

changed. Thus, if a prior ruling held that a

principle applied to A but not to B, and the

new ruling holds that it applies to both A

and B, the prior ruling is modified because

it corrects a published position. (Compare

with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions.

This term is most commonly used in a ruling

that lists previously published rulings that

are obsoleted because of changes in laws or

regulations. A ruling may also be obsoleted

because the substance has been included in

regulations subsequently adopted.

Revoked describes situations where the

position in the previously published ruling

is not correct and the correct position is

being stated in a new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

that were previously published over a

period of time in separate rulings. If the

new ruling does more than restate the substance of a prior ruling, a combination of

terms is used. For example, modified and

superseded describes a situation where the

substance of a previously published ruling

is being changed in part and is continued

without change in part and it is desired to

restate the valid portion of the previously

published ruling in a new ruling that is

self contained. In this case, the previously

published ruling is first modified and then,

as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names of

countries, is published in a ruling and that

list is expanded by adding further names

in subsequent rulings. After the original

ruling has been supplemented several

times, a new ruling may be published that

includes the list in the original ruling and

the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations

to show that the previous published rulings will not be applied pending some

future action such as the issuance of new

or amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

The following abbreviations in current use

and formerly used will appear in material

published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

Bulletin No. 2021–46

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

i

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

November 15, 2021

Numerical Finding List1

Bulletin 2021–46

Announcements:

2021-12, 2021-31 I.R.B. 267

2021-13, 2021-33 I.R.B. 314

2021-14, 2021-33 I.R.B. 315

Notices:

2021-39, 2021-27 I.R.B. 3

2021-40, 2021-28 I.R.B. 15

2021-41, 2021-29 I.R.B. 17

2021-42, 2021-29 I.R.B. 19

2021-38, 2021-30 I.R.B. 155

2021-44, 2021-31 I.R.B. 166

2021-45, 2021-31 I.R.B. 170

2021-47, 2021-32 I.R.B. 269

2021-46, 2021-33 I.R.B. 303

2021-48, 2021-33 I.R.B. 305

2021-49, 2021-34 I.R.B. 316

2021-43, 2021-35 I.R.B. 332

2021-50, 2021-35 I.R.B. 333

2021-51, 2021-36 I.R.B. 361

2021-52, 2021-38 I.R.B. 381

2021-53, 2021-39 I.R.B. 438

2021-54, 2021-41 I.R.B. 457

2021-55, 2021-41 I.R.B. 461

2021-58, 2021-43 I.R.B. 660

2021-59, 2021-43 I.R.B. 664

2021-57, 2021-44 I.R.B. 706

2021-56, 2021-45 I.R.B. 716

2021-60, 2021-45 I.R.B. 719

2021-35, 2021-46 I.R.B. 723

Revenue Procedures:—Continued

2021-40, 2021-38 I.R.B. 426

2021-41, 2021-39 I.R.B. 443

2021-32, 2021-42 I.R.B. 465

2021-44, 2021-42 I.R.B. 469

2021-42, 2021-43 I.R.B. 666

Revenue Rulings:

2021-12, 2021-27 I.R.B. 1

2021-13, 2021-30 I.R.B. 152

2021-14, 2021-31 I.R.B. 164

2021-19, 2021-42 I.R.B. 470

2021-15, 2021-35 I.R.B. 331

2021-16, 2021-36 I.R.B. 359

2021-17, 2021-37 I.R.B. 362

2021-18, 2021-40 I.R.B. 447

2021-21, 2021-44 I.R.B. 704

Treasury Decisions:

9951, 2021-30 I.R.B. 25

9952, 2021-39 I.R.B. 428

9953, 2021-39 I.R.B. 430

9956, 2021-41 I.R.B. 449

9957, 2021-41 I.R.B. 452

9955, 2021-42 I.R.B. 471

Proposed Regulations:

REG-107705-21, 2021-30 I.R.B. 162

REG-102951-16, 2021-32 I.R.B. 272

REG-109077-21, 2021-39 I.R.B. 445

REG-100718-21, 2021-42 I.R.B. 653

REG-107707-21, 2021-42 I.R.B. 657

Revenue Procedures:

2021-28, 2021-27 I.R.B. 5

2021-29, 2021-27 I.R.B. 12

2021-24, 2021-29 I.R.B. 19

2021-14, 2021-30 I.R.B. 158

2021-30, 2021-31 I.R.B. 172

2021-31, 2021-33 I.R.B. 324

2021-33, 2021-34 I.R.B. 327

2021-34, 2021-35 I.R.B. 337

2021-35, 2021-35 I.R.B. 355

2021-36, 2021-35 I.R.B. 357

2021-37, 2021-38 I.R.B. 385

2021-38, 2021-38 I.R.B. 425

2021-39, 2021-38 I.R.B. 426

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin

2021–52, dated December 27, 2021.

1

November 15, 2021

ii

Bulletin No. 2021–46

Finding List of Current Actions on

Previously Published Items1

Bulletin 2021–46

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin

2021–52, dated December 27, 2021.

1

Bulletin No. 2021–46

iii

November 15, 2021

Internal Revenue Service

Washington, DC 20224

Official Business

Penalty for Private Use, $300

INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

Bulletins are available at www.irs.gov/irb/.

We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it,

we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page

www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.

NW, IR-6230 Washington, DC 20224.